LRT Capital: “Stepan (SCL) is an Under-the-Radar Company”

LRT Capital Management, an investment management firm, published its third-quarter 2021 investor letter – a copy of which can be downloaded here. A return of +18.39% was recorded by the LRT Economic Moat strategy year-to-date, extending its 12-month returns to +35.34%. You can take a look at the fund’s top 5 holdings to have an idea about their best picks for 2021.

LRT Capital Management, in its Q3 2021 investor letter, mentioned Stepan Company (NYSE: SCL) and discussed its stance on the firm. Stepan Company is a Northfield, Illinois-based chemical manufacturing company with a $2.6 billion market capitalization. SCL delivered a -0.86% return since the beginning of the year, while its 12-month returns are down by -0.86%. The stock closed at $118.29 per share on November 26, 2021.

Here is what LRT Capital Management has to say about Stepan Company in its Q3 2021 investor letter:

“Stepan is an under-the-radar company with a market capitalization of approximately $3.0b.52 The company is engaged in the manufacturing of specialty chemicals, primarily for the cleaning industry. The company’s products are the principal ingredients in consumer and industrial cleaning products such as washing detergents, as well as shampoos, body washes, and fabric softeners. The company’s specialty products include emulsifiers, food stabilizers, flavorings, and nutritional supplements.

Don’t let the dullness of the company’s products fool you. While Stepan operates in a commoditized industry, the company has been an efficient operator and has been able to expand margins over time. What looks on the surface like a cyclical, commoditized business is in fact a very resilient provider of key inputs to daily necessities such as body and household cleaning products. Due to its resilience through different economic cycles, Stepan has been able to increase its annual dividend for 54 years in a row. What’s more, payouts to shareholders did not come at the expense of reinvesting in the business. The company has grown earnings-per-share by a factor of 5x over the last two decades while maintaining returns on invested capital in the mid-teens.”

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Based on our calculations, Stepan Company (NYSE: SCL) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. SCL was in 9 hedge fund portfolios at the end of the third quarter of 2021, compared to 14 funds in the previous quarter. Stepan Company (NYSE: SCL)  delivered a 2.78% return in the past 3 months.

Disclosure: None. This article is originally published at Insider Monkey.